The Cyprus Holding Company 2016

The Cyprus holding company:

A gateway to Europe, Asia, Africa and the Middle East

Tax Services

April 2016

kpmg.com.cy 02 | Section or Brochure name Table of contents

The Cyprus holding company 3

Corporate Tax Provisions 4

Other Taxes 6

Other Considerations 8

Tax Treaties: withholding tax tables 10

Cyprus holding matrix 12

The Cyprus Holding Company 1 ©2016 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The Cyprus holding company

Cyprus is a full member of the It is in full compliance with the code European Union and a member of the of Conduct for Business Taxation and Eurozone. Strategically positioned to against harmful tax competition. connect Europe to Africa, the Middle Cyprus proudly features on the East and Asia, Cyprus is a natural hub White list of OECD and has legally for business and trade. committed to the highest standards The recent political and social of transparency, by assuming an upheaval in the Eastern early adopter status for the automatic Mediterranean basin, which has exchange of information on tax spilled over the wider area of the matters. Middle East, in combination with the The KPMG network of professionals political and economic uncertainty in spans over 155 countries and the greater region, not only upgrade guarantees the success of our the strategic position and geopolitical clients’ business by complementing role of Cyprus in this part of the the efforts undertaken locally, world, they render Cyprus a symbol with the support and expertise we of security and stability, in its capacity possess globally. as the Easternmost border of Europe. KPMG in Cyprus has 6 offices Cyprus has in the last decades servicing the island and more established itself as a reputable than 770 personnel with qualified and trust-worthy financial centre professionals offering Audit, Tax and complemented by an advanced Advisory services of the highest legal, accounting and banking standards as prescribed by KPMG system, highly skilled and International. multilingual workforce, excellent telecommunication systems Join us and experience first hand and convenient year round flight a wider spectrum of opportunities connections. available to you and your business. The Cyprus tax legislation is fully compliant with the EU Acquis George Markides Communautaire and EU Directives. Board Member, Head of Tax

The Cyprus Holding Company 3

Tax residency Passive interest income, (income not dividend is not substantially lower A company is considered to be tax connected to a trade or business), is than the tax burden in Cyprus resident in Cyprus if the management exempt from corporate income tax (effective tax test ). and control function is exercised in and taxed separately at the Special Cyprus. Contribution for Defence (SCD) at the If neither of the above conditions is rate of 30% on a gross basis. satisfied, then dividends received Corporate tax from abroad are taxed at the SDC Trading profits are taxed at the rate of Dividends level at the rate of seventeen percent 12,5%, one of the lowest corporate Inter-company dividends (17%). income tax rates in Europe. A Cyprus tax resident company is Notional interest deduction (NID) exempt from tax when receiving Tax credit availability The NID is available on new qualifying dividends from another Cyprus tax A tax credit will be afforded according equity issued by a Cyprus company resident company, provided the to the Double Taxation Agreements on or after 1st January 2015 and dividend is not indirectly received (DTAs) concluded by Cyprus. In the used in the business for the purpose after the expiry of a four year period, absence of a DTA, Cyprus unilaterally of generating taxable income. It from the end of the year to which affords a credit for the foreign tax is calculated by multiplying the the profits giving rise to the dividend paid up to the amount of tax that new qualifying equity amount by a relate. would have been payable in Cyprus reference interest rate. The reference on the same income. For dividends received from EU Member States the interest rate is equal to the yield of Dividends received from abroad underlying tax credit is also available. the 10-year Governmental bond of As of January 2016, dividends the country in which the new capital received from abroad by a Cyprus tax Royalties is invested, plus 3%. The NID is resident company are exempt from If the intangible property right is deductible against the company’s corporate income tax, provided they granted to a Cyprus company for taxable profits that arise as a result are not allowed as a tax deduction in use outside Cyprus, then there is no of the newly introduced capital and the jurisdiction of the foreign paying withholding tax and the corporate cannot exceed 80% of the taxable company. profit as calculated before allowing rate of 12,5% is applied only on the royalty income left in the Cyprus for this deduction. Dividends received from abroad are Company. Gross amounts of royalties also exempt from Special Defense Interest Income from sources within Cyprus, by a Contribution (SDC) if one of the Active interest income (interest company which is not a tax resident of following conditions is satisfied: income effectively connected with Cyprus are liable to 10% withholding (1) The company paying the dividend the carrying on of a trade or business) tax at source. must not engage more than 50% is subject to the corporate income directly or indirectly in activities which tax rate of 12,5%, as regular trading Intellectual property rights (IPR) lead to passive income (active vs income. An 80% exemption on qualifying net passive test) IP income and capital gains upon OR disposal of the IP assets is available (2) The foreign tax burden on the income of the company paying the

©2016 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. for Cyprus tax resident companies. Amortization provisions over a 5 Trading in securities Losses incurred by a Cyprus company year period (for IP rights acquired or Any income arising from trading in in relation to business carried outside developed post 1st January 2012) are “securities” is completely exempt Cyprus, are allowed as a deduction available. The above tax incentives from tax. The term securities includes against taxable profits generated by cover a wide range of qualifying IP but is not limited to: ordinary and that Cyprus company in the current rights and the resulting effective tax preference shares, founder’s shares, year and any balance can be set- rate is always 2,5% or less. options on titles, debentures, bonds, off against profits of other group In the event of a loss, only 20% of short positions on titles, futures/ companies for the same year. that loss can be offset against income forwards on titles, swaps on titles, Losses that cannot be utilised in the from other sources or be carried depositary receipts on titles, rights current year, are carried forward for a forward to be offset against income of of claims on bonds and debentures, period of five (5) years, commencing following tax years. index participations (only if they result from the end of the year to which the in titles), repurchase agreements losses relate. Note: or Repos on titles, participations The Cyprus tax legislation will be in companies, units in open-end or Losses arising from a foreign fully aligned with the modified nexus closed-end collective investment Permanent Establishment (PE) can approach in accordance with the schemes such as Mutual Funds, be deducted against the profits of the OECD guidelines. International Collective Investment Cyprus company. Future profits of Schemes (ICIS) and Undertakings for the foreign PE however, will be taxed Withholding taxes Collective Investments in Transferable at the level of the Cyprus company There are no withholding taxes on Securities (UCITS). up to the amount of the losses payments to non tax resident persons previously relieved. (companies or individuals) in respect Tax losses of dividends and interest. Group relief is allowed for at least Business entertainment seventy-five percent (75%) group Expenses incurred in the course of holdings and is applicable only on business entertainment are generally Offshore drilling activities current year’s results assuming tax deductible whilst being subject As from 1st January 2016, a 5% claimants are Cyprus tax resident to a cap at the rate of 1% of gross withholding tax is levied on the companies and members of the same income with a maximum amount of remuneration derived by a non tax group for the whole tax year. €17.086. resident person, with no permanent establishment in Cyprus, as a result As of January 1st 2015, cross border Expenses related to innovation of the provision of services within group relief is allowed under the companies Cyprus in relation to the extraction, assumption that the subsidiary All expenses related to research exploration or use of the continental company surrendering the losses, is and development undertaken by shelf as well as the establishment and resident in the EU and that all other innovation companies as well as all use of pipelines and other installations possibilities for utilising such losses expenses incurred for the purchase on the ground, on the seabed and on in the country of residency or in the of shares in innovation companies the surface of the sea. member state of any intermediary will be treated as a deduction from holding company, have been taxable income. Foreign permanent establishments exhausted. (PE’s) Forex differences The profit of a foreign PE of a Cyprus Also from the above date, As from January 1st 2015, foreign holding company is exempt from intermediary companies that are not exchange (FX) gains or losses will corporate tax in Cyprus, if one of the tax residents of Cyprus will be ignored be tax exempt/not tax allowable following two conditions is satisfied: for Group relief purposes, assuming irrespective of whether they are (1) The PE must not engage more than they are tax residents within the EU realised or unrealised. The exemption 50%, directly or indirectly, in activities or in a country with which Cyprus will not apply to companies that are which lead to passive income, has a double tax treaty in place or trading in currencies and currency OR an agreement for the exchange of derivatives. (2) The foreign tax burden imposed at information. the level of the PE is not substantially lower than the tax burden in Cyprus.

The Cyprus Holding Company 5

Capital gains tax (CGT) A full CGT exemption applies for Capital gains are not included in the immovable property consisting of land ordinary trading profits of a business or land with a building or buildings if but instead are taxed separately under acquired from 16/7/2015 up to and the Capital Gains Tax Law. including December 31st. 2016. CGT is only imposed on the sale of immovable property situated in Inheritance or estate taxes Cyprus as well as on the sale of shares There are no inheritance or estate directly or indirectly held in companies taxes. (other than listed shares) in which Wealth taxes the underlying asset is immovable Cyprus imposes no tax on wealth. property situated in Cyprus. Capital gains tax is imposed at a flat rate of twenty percent (20%) after allowing for indexation. Capital Gains that arise from the disposal of immovable property held outside Cyprus or shares in companies which may have as an underlying asset immovable property situated outside Cyprus, are completely exempt from capital gains tax.

Thin capitalisation rules Double tax agreements (DTA’s) • The supply of management services There are no thin capitalisation rules Cyprus has currently concluded over for a consideration to subsidiaries; in the Cyprus tax legislation. Special 50 agreements for the avoidance • The provision of interest bearing caution must be exercised in relation of double taxation covering the financing to its subsidiaries to interest deductions in respect of overwhelming majority of the (unless the financing is sourced loans used for the purchase of assets European countries, the United States from dividends distributed by the not used in the business, as such of America, Canada, India, China, subsidiaries to which finance is interest expense is disallowed for tax Russia and the C.I.S. countries. granted); purposes. • Trading in shares i.e. purchasing and EU directives selling shares on a frequent basis Acquisition costs Cyprus has fully adopted all EU Tax with the intention to profit from the Any interest expense incurred for the related Directives including the Parent- fluctuations of the share price. direct or indirect 100% acquisition of Subsidiary, the Interest and Royalties, shares in a company, will be deductible the Merger Directive, and the Directive Where a holding company is registered for tax purposes, provided that the on Administrative Cooperation in the for VAT purposes, it may claim input assets of the company acquired do not field of Direct Taxation. VAT on goods and services acquired in include any assets that are not used in Cyprus and other EU Member States. the business. VAT The right to claim input VAT depends Where the exclusive purpose of a on the types of activities, besides the Transfer pricing holding company is the acquisition holding of investments, the company is There is no specific transfer pricing and holding of interest in shares in involved in and where these activities legislation in Cyprus, other than a other companies, with the intention take place. provision in the Income Tax Law which of deriving dividend income, such requires transactions between ‘related a company is not considered to be Capital duty parties’ to be in accordance with the performing an economic activity for Capital duty in Cyprus is estimated ‘arm’s length principle’. The Cyprus VAT purposes and consequently it at a flat rate of €105 payable upon tax legislation adopted the OECD does not have the status of a taxable incorporation plus the amount of 0,6% model commentary and guidelines to person. duty on the initial authorized capital. determine whether a transaction is at Shares issued out of the initial authorized arm’s length. Companies which are not performing capital does not carry additional capital economic activities have neither the duty. Exit route obligation nor the right to register for The Cyprus company offers an ideal VAT purposes and consequently they If a company needs to increase its exit route since there are no exit cannot claim input VAT. authorized share capital, the 0,6% duty taxes on the sale of shares or at the will be imposed on the amount of the liquidation of the company and no However, holding companies may increase. Capital duty can be minimized withholding tax upon the repatriation be liable to register for VAT where, in by issuing shares at a premium since of profits / proceeds to the non- addition to the holding of investments, share premium is not subject to capital resident shareholders. they also have taxable or exempt duty tax. activities such as:

©2016 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Annual corporate levy Every company registered in Cyprus is subject to annual levy of €350. In case of corporate groups, the total payment is capped at €20.000 allocated to each Cyprus company.

Stamp duty Stamp duty is enforced on written documents addressing Cyprus situated property or cases where the subject matter of the transaction is in Cyprus, irrespective of where the agreement is signed. Agreements with a value of up to €5.000 are not subject to stamp duty tax. Stamp duty on agreements in excess of €5.000 and up to €170.000 are subject to stamp duty tax of 0,15%. Any amount in excess of €170.000 is subject to stamp duty tax at the rate of 0,20%. The maximum stamp duty tax per agreement is €20.000. The duty is payable within 30 days from the day of signing of the agreement.

Advance tax rulings An established Tax rulings practice exists. Tax rulings can be obtained from the Income Tax office upon the taxpayer’s request.

Re-domiciliation of companies Re-domiciliation of companies in and out of Cyprus is possible.

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©2016 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Tax treaties: withholding tax tables The following tables give a summary of the withholding taxes provided for in the double tax treaties entered into by Cyprus.

Cyprus Effective PAID FROM CYPRUS (1) RECEIVED IN CYPRUS Companies Date Dividends Interest Royalties Dividends Interest Royalties % % % % % % Treaty countries 0 0 0 (2) Treaty rates Treaty rates Treaty rates Armenia 01/01/2012 0(27) 5 (6) 5 0(27) 5 (6) 5 Austria 01/01/1991 (31) 0 0 0 10 0 0 Bahrain (44) 0 0 0 0 0 0 Belarus 01/01/2000 5 (17) 5 5 5 (17) 5 5 Belgium 01/01/2000 10 (8) 10 (6,18) 0 10 (8) 10 (6,18) 0 Bosnia and Herzegovina (25) 01/01/1987 0 10 10 10 10 10 Bulgaria 01/01/2002 5 (22) 7 (6) 10 5 (22) 7 (6, 23) 10 (23) Canada 01/01/1985 0 15 (4) 10 (5) 15 15 (4) 10 (5) China 01/01/1992 0 10 10 10 10 10 Czech Republic 01/01/2010 5 (28) 0 10 5 (28) 0 10 Denmark 01/01/2012 15 (29) 0 0 15 (29) 0 0 Egypt 01/01/1996 15 15 10 15 15 10 Estonia 01/01/2014 0 0 0 0 0 0 Ethiopia (44) 5 5(51) 5 5 5(51) 5 Finland 01/01/2014 5 (9) 0 0 5 (9) 0 0 France 28/01/1983 0 10 (10) 0 (3) 10 (9) 10 (10) 0 (3) Germany 01/01/2012 5 (30) 0 0 5 (30) 0 0 Georgia 01/01/2017 0 0 0 0 0 0 Greece 01/01/1967 25 10 0 (12) 25 (11) 10 0 (12) Guernsey 01/01/2016 0 0 0 0 0 0 Hungary 01/01/1982 0 10 (6) 0 5 (46) 10 (6) 0 Iceland 01/01/2015 5(49) 0 5 5(49) 0 5 India 01/01/1993 (32) 10 (47) 10 (10) 15 (15) 10 (47) 10 (10) 15 (15) Iran (44) 5(22) 5 6 5(22) 5 6 Ireland 01/01/1962 (33) 0 0 0 (12) 0 0 0 (12) Italy (34) 01/01/1970 0 10 0 15 10 0 Kuwait 01/01/2014 0 0 5 0 0 5 Lebanon 01/01/2006 5 5 0 5 5 0 Lithuania 01/01/2015 0 (45) 0 5 0 (45) 0 5 Malta 01/01/1994 15 10 10 0 10 10 Mauritius 01/01/2001 0 0 0 0 0 0 Moldova 01/01/2009 5 (22) 5 5 5 (22) 5 5 Montenegro (25) 01/01/1987 0 10 10 10 10 10 Norway(35) 01/01/2015 0 (13,30) 0 0 0 (13, 30) 0 0 Poland(36) 01/01/2013 0 (37) 5 (6) 5 0 (37) 5 (6) 5 Portugal 01/01/2014 10 10 10 10 10 10 Qatar 01/01/2010 0 0 5 0 0 5 Romania 01/01/1983 10 10 (6) 5 (7) 10 10 (6) 5 (7) Russia 01/01/2000 (38) 5 (16) 0 0 5 (16) 0 0 San Marino 01/01/2008 0 0 0 0 0 0 Serbia (25) 01/01/1987 0 10 10 10 10 10 Seychelles 01/01/2007 0 0 5 0 0 5 Singapore 01/01/2002 0 10 (6,24) 10 0 10 (6,24) 10 Slovakia (39) 01/01/1981 0 10 (6) 5 (7) 10 10 (6) 5 (7) Slovenia 01/01/2012 5 5 (6) 5 5 5 (6) 5 South Africa (50) 01/01/1999 (52) 0 0 0 0 0 0 Spain 01/01/2015 0 (43) 0 0 0 (43) 0 0 Sweden 01/01/1988 0 10 (6) 0 5 (46) 10 (6) 0 Switzerland 01/01/2016 15(29) 0 0 15(29) 0 0 Syria 01/01/1996 0 (46) 10 (6) 15 (26) 0 (46) 10 (6) 15 (26) Thailand 01/01/2001 10 15 (6,20) 5 (21) 10 15 (6,20) 5 (21) Ukraine (19) 01/01/2014 (53) 5 (41) 2 10 (42) 5 (41) 2 10 (42) U.A.E 01/01/2014 0 0 0 0 0 0 United Kingdom 01/01/1973 (40) 0 10 0 (3) 15 (14) 10 0 (3) United States 01/01/1986 0 10 (10) 0 5 (48) 10 (10) 0

26) A rate of 10% applies to copyrights on literary, artistic the introduction of the necessary legal basis by Cyprus. 1) Under Cyprus legislation there is no withholding tax and scientific work including cinematograph films, and The Protocol introduces among others, new exchange on dividends, interests and royalties paid to non- films or tapes for television or radio broadcasting. of information provisions but does not amend the Residents of Cyprus. 27) The 0% is applicable if the beneficial owner has existing withholding rates set by the original Treaty. 2) In case where royalties are earned on rights used invested in the capital of the company not less than 39) In an Exchange of Letters dated 10 December 1999 within Cyprus there is a withholding tax of 10%. the equivalent of 150.000 Euro at the time of the and 10 January 2000, Cyprus and the Slovak Republic 3) 5% on film and TV royalties. investment. In all other cases the rate is 5%. agreed to continue to apply the Czechoslovak treaty of 4) 0% if paid to a Government or for export guarantee. 28) 0% if dividends received and beneficially held by a 15 April 1980 in relations between the two states. 5) 0% on literary, dramatic, musical or artistic work. company directly holding at least 10% of the capital of 40) The provisions of the Treaty enter into force on 6) 0% if paid to the Government of the other State. the company paying the dividends for an uninterrupted 01/01/1973 for Cyprus and 01/04/1973 for the United 7) This rate applies for patents, trademarks, designs or period of at least 1 year. Kingdom. models, plans, secret formulas or processes, or any 29) 0% of the gross amount of the dividends if the 41) The 5% applies where the company receiving the industrial, commercial or scientific equipment, or beneficial owner is a company (other than a dividend owns at least 20% in the capital of the for information concerning industrial, commercial or partnership) which holds directly at least 10 per cent paying company or has invested an amount of at least scientific experience. of the capital of the company paying the dividends EUR100.000. In all other cases, a 15% with holding 8) 15% if received by an individual or if received by a where such holding is being possessed for an shall apply. company controlling directly or indirectly less than uninterrupted period of no less than one year, if the 42) A reduced 5% withholding tax in respect of the use or 25% of the capital of the paying company. beneficial owner is the other Contracting State or the the right to use any copyright of scientific work, patent, central bank of that other State, or any national agency 9) 15% if received by an individual or if received by a trade mark, secret formula, process or information or any other agency (including a financial institution) company directly controlling less than 10% of the concerning industrial, commercial or scientific owned or controlled by the Government of that other voting power. experience will apply under the new Treaty. In all other State or if the beneficial owner is a pension fund or cases a general withholding tax on royalties of 10% will 10) 0% if paid to a Government bank or financial institution. other similar institution providing pension schemes apply. 11) The treaty provides for withholding taxes on dividends in which individuals may participate in order to secure 43) 5% if the recipient is an individual or if the recipient is a but Greece does not impose any withholding tax in retirement benefits, where such pension fund or other company directly holding less than 10% of the capital. accordance with its own legislation. similar institution is established, recognized for tax 44) Pending completion of the ratification process. 12) 5% on film royalties (apart from films broadcasted on purposes and controlled in accordance with the laws television). of that other State. 45) This rate applies to companies who are the beneficial owners of the dividend and hold directly at least 13) 5% if received by a person controlling less than 50% of 30) 15% if received by an individual or if received by a 10% of the share capital of the company paying the the voting power. company directly holding less than 10% of the share dividend. In all other cases the withholding tax is 5%. 14) 0% if recipient is a company which alone or together capital of the company paying the dividends. 46) 15% if received by an individual or if received by a with associated companies) control directly or 31) A protocol signed on 21 May 2012 entered into force company controlling directly less than 25% of the indirectly at least 10% of voting power. on 11 January 2013 and is effective as of 1 January capital of the paying company. 15) 10% for payments of a technical, managerial or 2014. The protocol introduces new provisions on 47) 15% if received by an individual or if received by a consulting nature. exchange of Information but does not amend the existing withholding rates set by the original Treaty. company controlling less than 10% of shares. 16) 10% if dividend paid by a company in which the (48) To be entitled to this rate (a) must be a corporation, beneficial owner has invested less than EUR 100.000. 32) The provisions of the Treaty enter into force on 01/01/1993 for Cyprus and 01/04/2013 for India. AND (b) minimum 10% ownership of the outstanding 17) If the investment is less than EUR 200.000, dividends shares of the voting stock during the part of the paying are subject to 15% withholding tax which is reduced to 33) The provisions of the Treaty enter into force on corporation’s taxable year which precedes the date 10% if the recipient is the beneficial owner and directly 01/01/1962 for Cyprus and 01/04/1962 for Ireland. of payment of the dividend and during the whole of controls 25% or more of the share capital of the paying 34) An amending protocol, signed on 4 June 2009, its prior taxable year (if any), AND (c) not more than company. entered into force on 23 November 2010. The Protocol 25% of the gross income of the corporation paying introduces clarifications as to the elimination of double 18) No withholding tax for interest on deposits with the dividends (for such prior taxable year (if any)) taxation and further new provisions on exchange banking institutions. consists of interest/dividends (other than interest of information but does not amend the existing 19) The old USSR/ Cyprus treaty is applicable until derived from the conduct of a banking, insurance, or withholding rates set by the original Treaty. 31/12/2013. From January 1st 2014, the provisions of financing business and dividends / interest received the Ukraine-Cyprus Double Tax Treaty enter into force. 35) In force until 31/12/2014, the Convention of 2 May from subsidiary corporation, 50% or more of the A new amending Protocol was signed on 6th July 1951 concluded between Norway and the United outstanding shares of the voting stock of which is 2015, introducing new rates, and will enter into effect Kingdom had been extended by Exchange of Notes, owned by the paying corporation at the time such as of 1st January 2019. in accordance with Article 20, to Cyprus. A new DTT dividends / interest is received). Otherwise a 15% has been signed between Cyprus and Norway on 5 20) 10% on interest received by a financial institution WHT rate applies. December 2013 and is in force as of January 1, 2015. or when it relates to sale on credit of any industrial, (49) 10% if received by an individual or if received by a commercial or scientific equipment or of merchandise. 36) An amending protocol, signed on 22 March 2012, company controlling directly less than 10% of the entered into force on 9 November 2012. The protocol 21) This rate applies for any copyright of literary, dramatic, capital of the paying company. introduces among others new rates for dividend and musical, artistic or scientific work. A 10% rate applies (50) A Protocol signed on 1 April 2015 introduces new rates interest as well as further amendments to the initial for industrial, commercial or scientific equipment. A to the Treaty; the Protocol is currently in the ratification Treaty; the withholding rates outlined herein refer to 15% rate applies for patents, trademarks, designs or process following completion of which, it will come the new rates introduced by the Protocol. models, plans, secret formulae or processes. into force. 37) The 0% is applicable if the beneficial owner hold 22) This rate applies to companies holding directly at least (51) 0% if paid to the Government, a political subdivision or directly at least 10% of the capital of the company 25% of the share capital of the company paying the local authority or the national bank of the other state. paying the dividend for an uninterrupted period of 24 dividend. In all other cases the withholding tax is 10%. (52) An amending protocol signed on 1 April 2015, entered months. In all other cases the rate is 5%. 23) This rate does not apply if the payment is made to a into force and it generally applies from 1 April 2012. 38) An amending protocol, signed on 7 October 2012, Cyprus international business entity by a resident of (53) An amending protocol, signed on 11/12/2015 has not entered into force on 2 April 2012. The provisions of the Bulgaria owning directly or indirectly at least 25% of yet entered into force. new Protocol are effective as of 1 January 2013 with the share capital of the Cyprus entity. the exception of 1 January 2017 (Provisions on “Gains 24) 7% if paid to a bank or financial institution. from Alienation of Property”) and the provisions on 25) Montenegro, Serbia and Bosnia and Herzegovina apply Assistance in Collection” that will generally apply upon the Yugoslavia/Cyprus treaty.

The Cyprus Holding Company 11

ISSUE ANSWER ISSUE ANSWER

CORPORATE INCOME TAX 12,5% TAX TREATY PROTECTION Yes, provided management RATE and control is in Cyprus

NOTIONAL INTEREST Yes DEDUCTION IP REGIME Yes

DEDUCTION OF CAPITAL LOSSES DEDUCTION OF COSTS • Deductibility of unrealised No Yes (unless they relate to the capital losses (write down in • Deductibility of interest costs acquisition of assets not used in value) the business of the company) • Deductibility No of realised capital • Deductibility of acquisition Yes (for 100% direct and losses costs indirect acquisitions of trading subsidiaries) • Deductibility of No amortisation • Deductibility of costs on No of underlying disposal goodwill

DIVIDENDS WITHHOLDING TAX • Exemption Yes (under lenient conditions)

• Participation requirement No • Dividends No • Minimum holding period No • Interest No

• Taxation requirement No if profits in subsidiary taxed > • Offshore Drilling Activities 5% 6,25%, or passive income < 50% of total income and dividend payment • Liquidation Proceeds No is not tax deductible in country of the dividend paying company

CAPITAL GAINS THIN CAPITALISATION RULES No

• Participation requirement None FOREX GAINS/LOSSES Tax Neutral • Minimum holding period None

• Taxation requirement No

RULING SYSTEM Yes CFC RULES No

CAPITAL DUTY 0,6% on the nominal value of TAX CONSOLIDATION Yes for companies in a 75% the authorized share capital group structure and provided (does not apply to share companies claiming group premium) relief are tax residents of Cyprus for the whole year

NICOSIA LIMASSOL

TAX SERVICES Sylvia Loizides Board Member, Head of Audit George Markides Board Member, Head of Tax T: +357 25 869 101 T: +357 22 209 240 E: [email protected] E: [email protected] Sofoclis Sofocleous Costas Markides Board Member Board Member T: +357 25 869 204 T: +357 22 209 246 E: [email protected] E: [email protected] George Nicolaou Senior Associate VAT SERVICES T: +357 25 869 205 Haris Charalambous E: [email protected] Board Member T: +357 22 209 300 E: [email protected] PARALIMNI

Paris Theophanous LARNACA Board Member T: +357 23 820 080 Michael Halios E: [email protected] Board Member T: +357 24 200 222 E: [email protected] PAPHOS

George Andreou Board Member T: +357 26 943 050 E: [email protected]

The Cyprus Holding Company 13

Nicosia Paralimni T: +357 22 209 000 T: +357 23 820 080 F: +357 22 678 200 F: +357 23 820 084 E: [email protected] E: [email protected]

Limassol Paphos T: +357 25 869 000 T: +357 26 943 050 F: +357 25 363 842 F: +357 26 943 062 E: [email protected] E: [email protected]

Larnaca Polis Chrysochous T: +357 24 200 000 T: +357 26 322 098 F: +357 24 200 200 F: +357 26 322 722 E: [email protected] E: [email protected]

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©2016 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Cyprus. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”) a Swiss entity. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International Cooperative (“KPMG International”) or KPMG member firms. 040316